It is not uncommon to see companies perform well in the years after insiders buy shares. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So shareholders might well want to know whether insiders have been buying or selling shares in Sanderson Farms, Inc. (NASDAQ:SAFM).
What Is Insider Buying?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, most countries require that the company discloses such transactions to the market.
Insider transactions are not the most important thing when it comes to long-term investing. But equally, we would consider it foolish to ignore insider transactions altogether. For example, a Harvard University study found that ‘insider purchases earn abnormal returns of more than 6% per year.
Sanderson Farms Insider Transactions Over The Last Year
The President, Lampkin Butts, made the biggest insider sale in the last 12 months. That single transaction was for US$1.6m worth of shares at a price of US$156 each. So it’s clear an insider wanted to take some cash off the table, even slightly below the current price of US$158. As a general rule we consider it to be discouraging when insiders are selling below the current price, because it suggests they were happy with a lower valuation. Please do note, however, that sellers may have a variety of reasons for selling, so we don’t know for sure what they think of the stock price. We note that the biggest single sale was only 8.8% of Lampkin Butts’s holding.
In the last year Sanderson Farms insiders didn’t buy any company stock. The chart below shows insider transactions (by individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
I will like Sanderson Farms better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Insider Ownership of Sanderson Farms
For a common shareholder, it is worth checking how many shares are held by company insiders. I reckon it’s a good sign if insiders own a significant number of shares in the company. Sanderson Farms insiders own about US$191m worth of shares (which is 5.4% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
What Might The Insider Transactions At Sanderson Farms Tell Us?
It doesn’t really mean much that no insider has traded Sanderson Farms shares in the last quarter. It’s great to see high levels of insider ownership, but looking back at the last year, we don’t gain confidence from the Sanderson Farms insiders selling. Of course, the future is what matters most. So if you are interested in Sanderson Farms, you should check out this free report on analyst forecasts for the company.
Of course Sanderson Farms may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions, but not derivative transactions.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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